Tag Archives: economic slump

The New Normal

I was meeting with a commercial tenant representative today over coffee, and during our discussion about what trends he was noticing in business, he said that he had been accumulating leads more rapidly over the past few months.  His view was that people were starting to consume more, or at least entertain thoughts of consumption and expansion efforts in business.  They’re not feeling more confident because the economy is on an upward trajectory, they’re just tired of being depressed.  I think he’s absolutely correct.  When you get hammered by a lot of bad news, eventually you don’t care anymore.  It gets to a point that you become sensitized toward bad news, and you just start moving forward with plans, and loosening the purse strings for no other reason than you become tired of the ways things are. 

This is the new normal.

Thinking about this, I realized that, although my set of circumstances differ, and my perspective is shaped by the view from my seat, my conclusion is the same.  

Things changed in the Fall of ’07, and have not been the same since.  2009 was an improvement, challenging but good.  Business in 2010 is different to the way it was in 2009 — things are changing rapidly.  There’s more activity, but not greater volume; clients are focused on cost cutting, do not have the ability to risk their remaining resources, are being smarter about their spending, and are less likely to ride with a project for as long as they had done in earlier years.  These factors are pressuring the market for services to change from the a la carte delivery of specific services to a more all-encompassing pre fixe.  Clients are demanding the delivery of those services in a way that adds value to their projects.  This is leading to more price stability for buyers of services, more specialization and niche building by sellers of services, and a movement away from the traditional ways in which services were priced and delivered. 

Once again, a new normal.  

Naturally, the question of whether we “are at the bottom” and “when is the economy going to return to normal” will be asked.  Well it isn’t going to — there’s a new normal. 

Our economy has lost millions of jobs during this recession, and even if we could replace them, it would take many years to do so.  Current business conditions, however, discourage small businesses from adding new workers.  Specifically,  health care costs, taxes, data privacy concerns, payroll costs and employee benefits are a major discouragement to hiring new employees.  At the same time, new technology has made it easier to outsource job functions than to hire more employees.  A company that needed 8 employees 10 years ago, can now achieve the same output with only 3 employees.   It’s possible now to bank online and make deposits from the office; bookkeeping  and accounting are easily outsourced as online software programs download banking, billing, revenue and expense data and process the data into registers and reports; billing and accounting information can be accessed from the internet by an outsourced independent contractor; printing, copying, marketing, advertising, internet strategy, as well as informational technology are all outsourced, and administrative and secretarial services are shared between companies that have co-located in larger office space, with any excess services needed being handled by virtual assistants. 

My point being that the old jobs lost are not going to come back, big companies will shrink, and small companies will try to remain small.  Jobs are being created, and will continue to be created but they are being created by new businesses, not existing businesses.  The new jobs are in different fields, and workers will need new skills. 

Once again, this will be the new normal. The new normal is to adapt or die.  Adaptation will need to be done quickly, and will require one to be nimble.  Large entities are by their nature not nimble and cannot adapt quickly enough to create significant opportunities in the new normal.  It’s up to us little guys to do that.  I’m up to the challenge, are you?

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Politics and Personality

You would have to be a complete loser to not be able to hold on to the democratic senate seat held for the past half century by the late Ted Kennedy in liberal Massachusetts.  Turns out, all you had to be was Martha Coakley.  Nothing against Scott Brown, who proved to be an astute politician, tapping into a disgruntled blue-state electorate with the right message at the right time, but the odds were against being the first Republican to be elected as a Senator from Massachusetts since 1972.  The election of Brown was fueled by an electorate that is disillusioned by the direction that the country is taking at the helm of our Democratic leaders in Washington. While the prior Republican Administration has been rightly blamed for the policies, deregulation, actions, and positions that created our current economic turmoil, the current Democratic Administration now owns the problem, as usually happens when you take over in the middle of a mess.  The current leaders in Washington have been in charge for a year now, and they have not engendered confidence and support for their agenda of  “change”.  Against that backdrop, Democratic Senate candidate Martha Coakley faced a restless electorate, and snatched defeat from the jaws of victory. Hers was one of the most listless, uninspiring, and misguided campaigns that I have had the displeasure of watching.  Martha Coakley, the Attorney General, clearly showed that she has very limited political skills. Hers was a botched campaign of massive proportions, a complete and utter failure to read the political landscape, the will of the people, and to energize an overwhelmingly democratic electorate that were still prepared to hold their noses and vote for her if she could have even showed one ounce of personality, one iota of a spark, one tiny inkling of political leadership.  She, however, showed nothing. Even a glimmer of personality would have shown she could interact on an inter-personal level with the other Senators in Washington, and represent us adequately in Congress.  She couldn’t figure out that the youthful, dynamic, vibrant and personable Scott Brown could beat her during this time of disillusionment with government, so she spent the Holidays with her family.  No need to run a campaign. 

My point being that politics and personality are inextricably mixed, and that even in one of the most liberal states in the nation, a democratic candidate with the personality of a Martha Coakley could lose a Senate seat held by her party for almost fifty years. 

From a business perspective, this, once again, is proof positive that we are in unchartered waters.  People are not confident in the path we are travelling, so they are holding back, whether it be from consumer purchases, investments, or on the institutional side, banks are holding onto, rather than lending money.  Taken together, these factors are more evidence of the point that I have made in many previous posts that we are nowhere nearly out of the recession woods yet, and that for the majority of the populace these remain treacherously difficult times.  From difficulty, we must, however, make opportunity, and to me it looks like 2010 will continue to present us with investment opportunities in the distressed asset marketplace.

The dirty "R" word

I’m going to call it. Recession is a dirty word, a word that just doesn’t roll very easily off politicians tongues. It’s not what you want to hear, and it’s a word that you just don’t want to use in an election year. The Boston Globe yesterday quoted Peter Dunay, chief investment strategist for New York based Meridian Equity Partners, as saying that ” . . . [t]his is why we’re probably heading into a recession.” Kudo’s to you, Peter, for heading down the pathway that few have dared to go, even though you put on the brakes with the “probably” qualification. Henry Paulson, the Wall Sreet titan who is currently the Bush Administration’s Treasury Secretary, stopped short of using the bloody “R” word, but has acknowledged that the economy has slowed down. Mr Paulson stated on Good Morning America this morning that the economy has taken a downward turn. When I see a man like Henry Paulson sitting at the helm of the Treasury Department, and taking a front and center position on the morning talk shows to ease our concerns, it makes me comfortable. It really does help. I do know, however, that when I see JP Morgan tap dancing on the grave of Bear Stearns, doing the same jig they have done on many graves in the past, I know that we are in a recession. Chase is the grim reaper of the economy. All banks tend to take away the umbrella they gave you when it starts to rain, but no bank is better at not only taking away the umbrella, but stepping on the face of its troubled clients; clients that it financed in the first place, and then buying their businesses out from under them. You know that the jig is up when you see Chase circling overhead.

It’s not, however, all that troubling to say that we are in a recession. Recessionary times are challenging, and they require a different set of skills. For those of us that are used to workouts, and tough deals we’re okay with the word recession; the more hair on it the better we say. There’s opportunity in tough times, so let’s just deal with the fact that its here, and do our best to bust out of it. There are many strategic business moves that can be made in these times that will position the smart and the street-wise to take advantage of the inevitable boom cycle that will follow.

We like to help clients understand that if you are in a position to invest, build, create, produce, and deliver in times like these, you can position yourself very well for the next cycle. And let’s face it, you’ll be helping move the economy out of its “slump” or whatever they want to call it.